SME Flashcards
what is sme
business with 1-200 people involved.
What percentage of businesses & employers do SMEs make up?
They account for about 99.8% of all businesses in Australia
Together, SMEs employ 70% of private sector workers
How do SMEs contribute to the economy?
SMEs contributed to approximately 56% of Australia’s GDP in 2013
Why do SMEs fail?
-Economic Conditions
-Lack of Business Skills/Management Inexperience
-Insufficient Capital
-Financial Mismanagement
Disadvantages of Establishing a New Business
Can take months or years to break-even, no network of suppliers or procedures, no customer base, high risk
Advantages of Establishing a New Business
Owner is free to make every decision, less expensive to establish than an existing business or franchise
Advantages of Purchasing an Existing Business
Business can be purchased as a turnkey operation, where all systems, procedures, policies and operations are in place
Disadvantages of Purchasing an Existing Business
Higher cost than establishment (goodwill & purchase of assets), business may be in decline stage and difficult to renew
What is a franchise?
A franchise is a business where a franchisee pays for the right to use an established business’s trade name and business formula
Advantages of a Franchise
Reduced risk of failure (only about 12% of franchises fail) and the selling of a proven, well-established product
Disadvantages of a Franchise
High start-up costs, ongoing fees and charges paid to the franchisor
Equity Finance
Equity finance is owners initial contribution known as start-up captial
Debt Finance
debt finance is money that is borrowed
zoning
local govts. Have the power to tell biz’s where they can be located. Businesses cannot be located in residential areas and factories are restricted to industrial areas.
wage costs
local govts. Have the power to tell biz’s where they can be located. Businesses cannot be located in residential areas and factories are resrticted to industrial areas.
